Are developers playing "chicken" with the market?

David Goldsmith

All Powerful Moderator
Staff member
September is often the slowest month of the year so some could be attributed to that. Let's see whether or not there is a rebound typical of October.

I'm hearing a non-insignificant amount of buyers talking about the disappearance of discounts and concessions and resisting jumping at higher prices
New development sales slow in September

Last month saw 337 contracts signed in NYC, down from August’s 421​

The spring and summer frenzy at new developments may have disappeared with scorching temperatures, but buyers are still on the prowl.
The pace of new development contracts slowed down in September by 2021’s record standards, but volume remained elevated compared to the previous two years, according to a monthly analysis of new development sales contracts by Marketproof, a real estate analytics company .

There were 337 contracts signed for new development condos in the city last month, down 22 percent from August’s total of 421. Despite the slowdown, September’s activity is still up 30 percent compared to the same time last year and up 29 percent from September 2019.

“We had three months in the summer that were truly remarkable,” said Kael Goodman, CEO of Marketproof. “These are still very elevated numbers [we’re] just not at the peak anymore.”
Goodman said new development sales are not influenced as strongly by seasonal trends and “there’s no reason to think that anything is really going to change.” He said he expects strong sales compared to past years to continue.

As is typical, most of last month’s contracts were signed in Manhattan and Brooklyn. Manhattan had 174 deals, followed by Brooklyn’s 120. Queens had 43 contracts.
The best-selling projects were 160 Imlay in Red Hook with 11 signed contracts last month, Long Island City’s Skyline Tower with 10 contracts and 300 West in Harlem, where 8 deals were inked.
 

David Goldsmith

All Powerful Moderator
Staff member


Children’s Fund moves to foreclose on Ceruzzi’s UES condo project​

Lender gets aggressive as developer struggles to control Hayworth building​

Ceruzzi Properties has tried just about everything to save its troubled Hayworth condo project on the Upper East Side, but the developer has run out of rope.
The lender on the 61-unit building on Lexington Avenue initiated a foreclosure action for Ceruzzi’s ownership interest in the property, according to a notice for the auction.
The move by the UK-based Children’s Investment Fund comes after Ceruzzi — whose founder, Louis Ceruzzi, died unexpectedly in 2017 — tried a number of tactics to make the best of the situation and control the fate of the project.

The developer, led by president Arthur Hooper, tried and failed earlier last year to secure rescue financing for the Hayworth and later sought to sell its equity position. But Ceruzzi’s price was too high, according to a source familiar with the project, and potential investors balked.
The Children’s Fund sued Ceruzzi last fall for missed payments on the construction loan, and as recently as last month Ceruzzi agreed to a $29 million judgment. It’s not clear what has since led to Children’s initiating the foreclosure.

Representatives for Ceruzzi and Children’s Investment Fund did not immediately respond to requests for comment.
An auction for Ceruzzi’s stake in the completed building is scheduled for Jan. 10, according to materials from a Cushman & Wakefield team led by Adam Spies and Adam Doneger, which is marketing the sale.
Ceruzzi began assembling the site for the Hayworth, 1289 Lexington Avenue, in 2013, and launched sales in 2019. But by then the city’s condo market had weakened significantly and the project struggled.

The Children’s Investment Fund, which backed some of the biggest condo projects of the last development cycle, has become more aggressive with delinquent borrowers. The company is foreclosing on HFZ Capital Group’s interest in its $2 billion XI project on the High Line.
 

David Goldsmith

All Powerful Moderator
Staff member
Huge numbers this week. This week's New Development Report from Sotheby's Kevin Brown Team. unnamed(20).jpg
 

David Goldsmith

All Powerful Moderator
Staff member
Every day this does trade at half off represents a vote of no confidence by developers.
 

David Goldsmith

All Powerful Moderator
Staff member


Fidi condo tower risks foreclosure as Trinity Place Holdings races to refinance​

After series of forbearance agreements, developer has until Oct. 31 to cure defaults at 77 Greenwich St.​

Trinity Place Holdings is racing to close an inventory loan for its trophy Financial District condo tower before forbearance agreements with its lenders expire.
Sources familiar with the project said the developer is set to close this week on a loan from an undisclosed lender that would refinance existing debt on the 40-story condo at 77 Greenwich Street, but the scramble underscores problems that have been brewing at the project for years

Construction delays, slow sales and a lack of cash on hand have put the project’s senior and mezzanine loans in default, filings with U.S. Securities and Exchange Commission show. The mixed-use tower designed by FXFOWLE includes 90 luxury condos, an elementary school and over 7,500 square feet of retail space.
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The project’s senior lender, Massachusetts Mutual Life Insurance, provided $190 million in construction financing in 2017 and, though the loans are slated to mature in January and have a one-year extension option, the lender has entered into forbearance agreements with Trinity three times. The first forbearance agreement was signed in Sept. 2019 after Trinity defaulted on the loan’s $15 million liquidity requirement.

The project hit another snag a few months later, when construction was halted due to a government-ordered shutdown in the early days of the pandemic. Work on the site didn’t fully restart until June 2020 and the delay compromised the project’s sales efforts, the developer told investors.
In December, MassMutual agreed to modify the terms of its loans to extend deadlines for construction and sales into 2021 with construction slated to wrap by Nov. 30 and closings on units to begin in the third quarter.

That same month, Trinity secured a $7.5 million mezzanine loan from Davidson Kempner Capital Management. Proceeds of the loan were used to pay down $8 million of senior debt and fund interest reserves required under the senior loan terms.
Early this year, as the new development market was heating up across the city, Trinity tried to jump start the project’s sales by switching brokers. It replaced new development firm The Marketing Directors with celebrity broker Ryan Serhant’s firm. At the time, the outgoing firm had noted the challenge of selling the condos while construction was still underway. Serhant took over in April and rebranded the tower with a French-inspired moniker, “Jolie.”

Serhant declined to comment on how many contracts his firm has secured, but said interest from buyers was “robust.” In March, Trinity reported 16 units in contract to investors, SEC filings show. Prices range from $1,538 to $3,057 per square foot and closings began earlier this month.
“The unit sizes have been really well received. The finishes are beautiful,” said Serhant. “As the building gets more complete, we see higher and higher deal flow.”

But the efforts still fell short of lenders’ standards. By June, Trinity was once again in default of both its senior and mezzanine loans, SEC filings show, due to the developer’s failure to meet certain sales and construction deadlines, including the delivery of a new subway entrance pursuant to an agreement with the MTA. The developer had also failed to maintain $8 million in cash per the loan’s modified liquidity requirement and make a $2.5 million deposit to an interest reserve.

A spokesperson for MassMutual subsidiary Barings LLC said the lender is not currently pursuing foreclosure proceedings at 77 Greenwich.
“Massachusetts Mutual Life Insurance Company, acting through its investment adviser, Barings LLC, has and continues to work with its borrowers who have been impacted by the COVID-19 pandemic,” said Barings’ chief communication officer Cheryl Krauss in a statement provided after this article was originally published.

Instead of curing the defaults, Trinity is focused on securing fresh financing to retire the existing debt. The effort began in April when the company said it was fielding unsolicited proposals from “several well-known institutional real estate lenders.” By June, Trinity told investors it had signed a term sheet with an undisclosed lender. The same month, MassMutual and Davidson Kempner both signed forbearance agreements giving the developer until Oct. 1 to close the deal. After Trinity missed the deadline, the agreements were extended through Oct. 31.

As the developer hurried to close, it secured a $10.5 million loan from its joint venture partner on The Berkley, a luxury apartment building in Williamsburg. The one-year loan has an interest rate of 10 percent with two 12-month extensions. Its proceeds will be used to refinance the debt at 77 Greenwich, Trinity’s SEC filings show. Trinity was also in talks with Davidson Kempner to provide additional financing, but no deal was reported.

Trinity, MassMutual and Davidson Kempner did not respond to requests for comment.
Trinity is publicly traded on the New York Stock Exchange and has a market cap of just under $72 million. 77 Greenwich is its largest asset. Other buildings include a 50 percent stake in The Berkley, a 10 percent stake in another Williamsburg rental at 250 North 10th Street and a retail property in Paramus, New Jersey. The firm also owns intellectual property rights to a collection of consumer brands dating back to its corporate predecessor, discount clothing chain Syms. 77 Greenwich is located on the site of a shuttered Syms store.

Trinity has been led by Matthew Messinger, an alum of developer Forest City Ratner Companies, since 2016. In August, the company sought to sell $10 million worth of its shares to raise cash. Its shares opened at $2.20 Wednesday morning, up 12 percent since the start of the month. Its largest shareholders are value investors Third Avenue Management and Michael Price.
 

David Goldsmith

All Powerful Moderator
Staff member
"Kael Goodman, CEO of Marketproof and author of the report, said the increase in asking prices “continues that trend of the higher priced stuff moving well,” which he attributed to discounts.

“Developers always have to make a choice between price and sales velocity. And by and large the choice in these recent months has been for sales velocity,” said Goodman. “That means there has been discounting.”
 

David Goldsmith

All Powerful Moderator
Staff member

Developers file applications for 3,000-plus apartments in NYC​

Upcoming tax exemption expiration and rezoning might have caused surge​

Multifamily projects once again dominated the 10 biggest new construction filings last month, continuing the trend in the pandemic recovery.

Together, top 10 projects for October would add nearly 3,000 residential units, more than double the number proposed in September.

This surge of applications may be attributed to the June 2022 expiration of the city’s controversial tax exemption program known as 421a. Facing uncertainties about the future of the program, developers may be rushing to push their proposals through. To qualify for the current exemption, projects must commence construction on or before June 15, 2022.
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Another catalyst might have been rezoning, as two of the 10 biggest projects were proposed in Inwood in northern Manhattan, where the long-stalled rezoning finally took effect about a year ago after having cleared court challenges by community activists.

The top 10 list also includes two proposals for Gowanus. Eighty-two blocks of the Brooklyn neighborhood await the City Council’s final approval of a controversial rezoning that would pave the way for about 8,500 new apartments, including 3,000 low- and moderate-income units.
 

David Goldsmith

All Powerful Moderator
Staff member
For decades the area now known as Billionaires Row was a hard sell. Even nice buildings like The Osborne and Alwyn Court. But developers decided to cram a boatload of very expensive units there at very high prices because zoning allowed them to. Apparently the market is still resistant.

MIDTOWN NEW DEVELOPMENTS LAG​

POST-PANDEMIC ANALYSIS OF MIDTOWN MANHATTAN NEW DEVELOPMENT SALES​

November, 2021​


While many submarkets across New York City are experiencing an uptick in new development sales activity in 2021, a section of Midtown has seen a decline. How has this submarket, home to Billionaire’s Row and the most expensive condo buildings in the city, performed compared to other submarkets with a similar concentration of new development?
Marketproof New Development conducted a longitudinal study of the new development market in Midtown, focusing on the area between 50th Street and Central Park South from river to river. We compared activity in this section from 2021 with the same period in 2019 and we analyzed that performance against other new development condo-centric submarkets, including Hudson Yards, Chelsea and FiDi.
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SUMMARY​


Midtown underperformed in post-pandemic 2021 (1/1/2021 - 10/31/2021) when compared with the same time period in pre-pandemic 2019 (1/1/2019 - 10/31/2019) in several key metrics.

  • -5.94% in number of contracts signed
  • -13% in aggregate dollar volume of contracts
  • -10.86% in average price / sq ft
  • -7.5% in average unit price

48% of unsold new condo units are priced above $10M in this section of Midtown while the Manhattan average contract price was $4.04M for the first 10 months of 2021. This price discrepency may partially explain the relative poor performance of the Midtown submarket.

NUMBER OF CONTRACTS SIGNED​


Compared to the same period in 2019, Midtown had a 5.9% decrease in the number of contracts reported in 2021.
The number of contracts reported for the first 10 months of 2021 was 95 compared to 101 in the first 10 months of 2019.
This section of Midtown was the only submarket to see a decrease in contract actvity in Manhattan. The percent change falls short of other markets that have a similar concentration of new development projects.

AGGREGATE $ VOLUME OF CONTRACTS​


Compared to the same period in 2019, Midtown had a 13% decrease in the aggregate dollar volume of contracts reported in 2021.
The total dollar volume of contracts reported for the first 10 months of 2021 was $678M compared to $779M in the first 10 months of 2019.
This section of Midtown was the only submarket to see a decrease in aggregate dollar volume in Manhattan. The percent change falls short of other markets that have a similar concentration of new development projects.

AVERAGE PRICE / SQ FT​


Compared to the same period in 2019, Midtown had a 10.9% decrease in the average price / sq ft in 2021.
The average price / sqft for the first 10 months of 2021 was $2,715 compared to $3,046 in the first 10 months of 2019.
This section of Midtown was the only submarket to see a decrease in average unit price in Manhattan. The percent change falls short of other markets that have a similar concentration of new development projects.

AVERAGE UNIT PRICE​


Compared to the same period in 2019, Midtown had a 7.5% decrease in the average unit price in 2021.
The average unit price for the first 10 months of 2021 was $7.1M compared to $7.7 in the first 10 months of 2019.
This section of Midtown was the only submarket to see a decrease in average price / sq ft in Manhattan. The percent change falls short of other markets that have a similar concentration of new development projects.

PRICE DISTRIBUTION​


In this section of Midtown, 48% (194 units) of unsold new development inventory is price above $10M.
The average unit price that went into contract in the first 10 months of 2021 was $4.04M across Manhattan as a whole.
The concentration of higher priced units may partially explain the relative poor performance of this section of Midtown.

 

David Goldsmith

All Powerful Moderator
Staff member

Manhattan logs busiest month for new development sales since April​

Citywide contracts nearly doubled year-over-year, but slowed compared to October due to 27% dip in Brooklyn​

The pace of new development sales didn’t slow down for Thanksgiving this year — except in Brooklyn.
Buyers signed contracts for 413 new development condos across the city in November, a slight drop from October’s 449 deals, according to a monthly analysis by Marketproof.

November’s contracts nearly doubled the amount signed in November 2020 and were up almost 80 percent from November 2019.
The month-over-month decline was primarily due to a 27 percent drop in Brooklyn contracts, from 184 in October to 138 in November. Queens saw 43 deals, roughly the same as in October.

Manhattan’s 231 contracts, meanwhile, marked the second-busiest month this year, trailing only April, when 285 contracts were signed. April was the city’s best month for new condo sales in five years, with 474 deals across the five boroughs.
“It’s just amazing the strength of this market,” said Marketproof CEO Kael Goodman, who authored the report.

Goodman said an anticipated influx of foreign buyers resulting from the lifting of travel restrictions on Nov. 8 has yet to noticeably impact the market.
“We haven’t seen evidence of that,” he said. “What I can say is that it’s one of the things we’re all waiting for.”
The best-selling projects last month included Naftali Group and Rockefeller Group’s condo at 200 East 83rd Street on the Upper East Side, where 16 contracts were signed, Skyline Tower in Long Island City, which saw 15 deals, and Tishman Speyer’s 11 Hoyt, where nine contracts were signed.

Extell Development’s 1010 Park Avenue and Broad Street Development’s 40 Bleecker Street sold their final units last month.
 

David Goldsmith

All Powerful Moderator
Staff member
This week's New Development Report from Sotheby's Kevin Brown Team. These are huge numbers for December. unnamed(27).jpg
 

David Goldsmith

All Powerful Moderator
Staff member

All Year Files for Bankruptcy to Stave Off Insolvency Lawsuits​

All Year Holdings — the Brooklyn based-developer behind The William Vale hotel — filed for bankruptcy on Tuesday to stave off potential insolvency lawsuits from bondholders on its $1.6 billion in debt, court filings in Southern District of New York Bankruptcy Court show.

The firm had been negotiating to restructure its defaulted debt with bondholders in Israel, but was unable to come to an agreement on Jan. 4, so it filed for Chapter 11 so it’s not “exposed to potential insolvency litigation across multiple jurisdictions,” the filings say. It also came a day after All Year’s board found out that Founder Yoel Goldman entered into a $37 million summary judgment earlier this month without the board’s approval.

SEE ALSO: Alicia Glen on Where Her New Firm Is Investing and What Eric Adams Should Do
“All Year Holdings has been engaged in a robust process to maximize the value of its real estate portfolio, which is continuing to advance with the support of bondholders,” a spokesperson for All Year said in a statement. “All Year continues to maintain ample liquidity to manage its ongoing operational needs and the needs of its subsidiary properties, including paying mortgage and related property expenses in a timely manner.”

The developer started 2020 with the majority of its developments completed. It was also in contract for a $675 million refinance to replace the construction and bond debt on its Denizen development in Bushwick, Brooklyn, and a $346 million portfolio sale to stabilize its cash cushion.

Things fell apart quickly, though, after the pandemic hit as All Year started missing payments on various mezzanine loans, paused payments on its bonds in Israel, and failed to close the Denizen refinance. It filed for bankruptcy for the entities tied to the Denizen in February to block a Uniform Commercial Code foreclosure sale on the development, and sold it to Atlas Capital Group for $506 million earlier this month.

All Year has also started to field a series of bids for its signature William Vale hotel development in Williamsburg, Brooklyn, with co-owner Zelig Weiss recently making an all-cash offer for $163 million on the property.

Its $1.17 billion portfolio currently is comprised of 1,648 residential units and 69 commercial units spread across Bushwick, Williamsburg and Bedford-Stuyvesant, according to its bankruptcy filing. The debt it’s carrying includes $800 million in bonds and about $760 million in mortgage debt.
 
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